INSO CORPORATION
EMPLOYMENT AGREEMENT
AGREEMENT effective the 1st day of April, 1999, by and between
Inso Corporation, a Delaware corporation with principal offices
at 00 Xx. Xxxxx Xxxxxx, Xxxxxx, XX 00000 ("Inso"), and Xxxxxxx X.
Xxxxxx, residing at 00 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxx,
00000-0000 ("Executive").
The parties hereto, intending to be legally bound, hereby agree
upon the following terms of employment of the Executive by Inso.
1. Position and Responsibilities.
(A) Title. Executive shall serve as Chief Executive
Officer ("CEO") and Chairman of the Board of Inso, subject to the
terms and conditions set forth in this Agreement.
(B) Services. During the term of this Agreement,
Executive agrees to undertake such activities on behalf of Inso
as the Board of Directors from time to time requests, and
Executive shall exercise such powers and perform such duties in
relation to the business and affairs of Inso as may from time to
time be vested in him or requested by the Board of Directors of
Inso. Executive shall at all times report to, and his activities
shall at all times be subject to the direction and control of,
the Board of Directors of Inso. Inso specifically acknowledges
that Executive is a non-executive director of Strategic
Diagnostics, Inc. and is an executive director and a principal
investor in PharmaCom Group, Inc., a privately held educational
marketing company based in Stamford, Connecticut. These
activities require the Executive's periodic attention but not to
the extent that Executive is unable to devote substantially all
of his business time, attention and services to the diligent,
faithful and competent discharge of such duties for the
successful operation of Inso's business.
Inso specifically acknowledges, understands and agrees that
Executive shall continue to maintain his principal residence in
Connecticut and that he shall not be required to establish his
principal residence and only office in the metropolitan Boston
area; there shall be no established minimum number of days per
month in which Executive shall be required to work in Inso's
metropolitan Boston offices.
2. Compensation: Base Salary, Bonus, Stock Options and Other
Benefits. The following compensation shall be payable to the
Executive during the term of his employment as CEO of Inso. The
Executive's compensation package shall be reviewed annually by
the Board of Directors.
(A) Base Salary. The Executive's initial base salary
shall be Two Hundred and Sixty Thousand Dollars ($260,000) per
year. Such salary shall be payable in conformity with Inso's
customary practices for executive compensation as such practices
shall be established or modified from time to time. Salary
payments shall be subject to all applicable federal and state
withholding, payroll and other taxes.
(B) Bonus. The Executive's target annual bonus shall
be sixty percent (60%) of his then-current base salary, payable
at the discretion of the Board of Directors based upon the
provisions of Inso's cash incentive compensation plan for senior
executives.
(C) Stock Options. Effective May 6, 1999, Executive
shall be granted Stock Options to purchase One Hundred Thousand
(100,000) shares of Inso's common stock as follows: 85,185 shall
be Non-qualified Stock Options, and 14,815 shall be Incentive
Stock Options. Such options shall have an exercise price of
$6.75 per share, and shall be subject to vesting as follows:
(i) Options (of which 4,938 are Incentive Stock
Options, and 28,395 are Non-qualified Stock
Options) to purchase 33,333 shares shall vest
on the earlier to occur of (1) March 31,
2000, and (2) the date of Executive's
termination of employment as CEO of Inso.
Notwithstanding the foregoing, if prior to
March 31, 2000 the Executive terminates his
employment as CEO of Inso other than for Good
Reason or Inso terminates the employment of
the Executive as CEO for Cause, then no
options shall vest under this subsection
2(C)(i).
(ii) Options (of which 4,938 are Incentive Stock
Options, and 28,395 are Non-qualified Stock
Options) to purchase an additional 33,333
shares shall vest on the earlier to occur of
(1) March 31, 2001, and (2) the date of
Inso's termination of Executive's employment
as CEO of Inso other than for Cause, so long
as such date is between April 1, 2000 and
March 30, 2001. Notwithstanding the
foregoing, if prior to March 31, 2001, the
Executive terminates his employment as CEO of
Inso for any reason or Inso terminates the
employment of the Executive as CEO of Inso
for Cause, then no options shall vest under
this subsection 2(C)(ii);
(iii) Options (of which 4,939 are Incentive Stock
Options, and 28,395 are Non-qualified Stock
Options) to purchase an additional 33, 334
shares shall vest on the earlier to occur of
(1) March 31, 2002, and (2) the date of
Inso's termination of Executive's employment
as CEO of Inso other than for Cause, so long
as such date is between April 1, 2001 and
March 30, 2002. Notwithstanding the
foregoing, if prior to March 31, 2002, the
Executive terminates his employment as CEO of
Inso for any reason or Inso terminates the
employment of the Executive as CEO of Inso
for Cause, then no options shall vest under
this subsection 2(C)(iii).
(D) Benefits. Inso shall provide Executive with such
medical, dental, vision care, life insurance, disability, 401(K)
and other benefits as it makes available to Inso's Chief
Operating Officer. Such participation shall be subject to (i)
the terms of the applicable plan documents, and (ii) generally
applicable Inso policies. A copy of Inso's current policies will
be provided to you in a separate letter from Inso's HR
department.
(E) Vacation. Executive shall be entitled to four (4)
weeks of vacation per year, to be taken at such times and at such
intervals as shall be determined by Executive, subject to the
reasonable business needs of Inso.
(F) Expenses. It is understood that Executive will
from time to time incur reasonable expenses in conjunction with
his employment. Inso will reimburse the Executive for any such
expenses in accordance with Inso's policies. Without limitation,
Inso shall reimburse the Executive for the reasonable cost of
renting an apartment in the Boston area and associated living
expenses, as well as for the cost of travel between Inso's
principal office and the Executive's residence(s).
3. Nondisclosure. The Nondisclosure Agreement entered into by
the Executive and Inso on April 27, 1999, shall remain in full
force and effect, and is incorporated herein by reference.
4. Indemnification and Insurance. From and after the date of
this Agreement, the Executive shall continue to be entitled to
indemnification as an "Officer" of Inso in accordance with
Article V of Inso's By-laws as in effect as of the date of this
Agreement, notwithstanding any subsequent amendment to such By-
laws. The term "Officer" shall have the meaning set forth in
Article V of Inso's By-laws. Inso agrees to maintain Director
and Officer liability insurance coverage in an amount not less
than $10,000,000.
5. Definitions. The following definitions shall apply with
respect to this Agreement:
5.1 The following, as determined by the Board in its
reasonable judgment, shall constitute "Cause" for termination of
the Executive's employment as CEO of Inso: (i) Executive's
failure to perform, or material negligence in the performance of,
his duties and responsibilities to Inso; (ii) material breach by
Executive of any provision of this Agreement; (iii) other conduct
by Executive that is materially harmful to the business,
interests or reputation of Inso; (iv) an act of fraud,
embezzlement or theft in connection with Executive's duties to
Inso or in the course of his employment with Inso, or (v) gross
misconduct which is demonstrably and materially injurious to
Inso.
5.2 "Disability" shall be deemed to have occurred if
Executive becomes disabled during his employment under this
Agreement through any illness, injury, accident or condition of
either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and
responsibilities hereunder for ninety (90) days during any period
of three hundred and sixty-five (365) consecutive calendar days.
If any question arises as to whether during any period Executive
is so disabled, Executive shall, at the request of Inso or the
Board of Directors, submit to a medical examination by a
physician selected by Inso or the Board of Directors to determine
whether Executive is so disabled. Such determination shall, for
the purposes of this Agreement, be conclusive of the issue. If
this question arises and Executive does not submit to the medical
examination, the Board of Director's determination of the issue
shall be binding on Executive.
5.3 "Good Reason" shall mean any of the following
circumstances:
(A) without the Executive's express written consent,
any significant diminution in the Executive's position, duties,
responsibilities, power, title or office, including without
limitation the hiring and/or promotion by Inso of another
individual as CEO;
(B) without the Executive's express written consent,
any reduction in the Executive's annual base salary;
(C) without the Executive's express written consent,
the failure by Inso to (i) continue in effect any material
compensation or benefit plan in which the Executive participates,
unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to
such plan, (ii) continue the Executive's participation therein
(or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of
benefits provided and the level of his participation relative to
other participants or (iii) award cash bonuses to the Executive
in amounts and in a manner substantially consistent with past
practice in light of Inso's financial performance; or
(D) without the Executive's express written consent,
the failure by Inso to continue to provide the Executive with
benefits substantially similar to those enjoyed by him under any
of Inso's life insurance, medical, health and accident, or
disability plans, the taking of any action by Inso which would
directly or indirectly materially reduce any of such benefits, or
the failure by Inso to provide the Executive with the number of
paid vacation days to which he is entitled on the basis of years
of service with Inso in accordance with Inso's normal vacation
policy.
(E) A "Change of Control" of Inso occurs. A "Change in
Control" shall occur or be deemed to have occurred only if any of
the following events occur:
(i) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (other than Inso, any trustee or
other fiduciary holding securities under an employee benefit plan
of Inso, any corporation owned directly or indirectly by the
stockholders of Inso in substantially the same proportion as
their ownership of stock of Inso) is or becomes the "beneficial
owner" (as defined in Rule 13(d)(3) under the Exchange Act),
directly or indirectly, of securities of Inso representing 33
1/3% or more of the combined voting power of Inso's then
outstanding securities (other than as a result of the acquisition
of such securities directly from Inso);
(ii) during any period of two (2) consecutive
years (specifically including any period prior to the execution
of this Agreement), individuals who at the beginning of such
period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement
with Inso to effect a transaction described in paragraph (i),
(iii) or (iv) of this Subsection) whose election by the Board or
nomination for election by Inso's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved cease for any reason to constitute at least a majority
thereof;
(iii) the stockholders of Inso approve a
merger or consolidation of Inso with any other corporation, other
than (A) a merger or consolidation which would result in the
voting securities of Inso outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than 50% of the combined voting power of the voting
securities of Inso or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of Inso
(or similar transaction) in which no person (as hereinabove
defined), other than a person holding more than 50% of the
combined voting power of Inso's then outstanding securities
immediately prior to such recapitalization, acquires more than
50% of the combined voting power of Inso's then outstanding
securities; or
(iv) the stockholders of Inso approve a plan of
complete liquidation of Inso or an agreement for the sale or
disposition by Inso of all or substantially all of Inso's assets.
6. Termination. This Agreement may be terminated at any time
(1) by the Company (a) for any reason other than for Cause on
sixty (60) days written notice, and (b) for Cause on thirty (30)
days written notice; and (2) by the Executive (a) for any reason
other than for Good Reason on sixty (60) days written notice, and
(b) for Good Reason on thirty (30) days written notice.
7. Effect of Termination of Executive's Employment.
7.1 Termination by Inso Without Cause; Termination by
Executive for Good Reason; Disability or Death of Executive.
Except as otherwise described in Section 7.4 below, in the event
of termination of Executive's employment as CEO by Inso without
Cause, by Executive for Good Reason, or as a result of Disability
or the death of Executive, Executive (or his estate, as the case
may be) shall be entitled to the following compensation:
(A) Six (6) months of base salary, payable in equal
bi-weekly installments over a twelve (12) month period, beginning
on the first day following the effective date of termination;
provided that Executive shall cease to receive such base salary
payments should Executive no longer serve as a member of the
Board of Directors of Inso, effective on the date that Executive
ceases service as a member of the Board of Directors of Inso;
(B) All base salary earned through the effective date
of termination, all accrued but unused vacation time earned
through the effective date of termination, all then unreimbursed
expenses, plus a bonus equal to the greater of (1) $100,000, or
(2) the Executive's pro-rated target annual bonus, based upon the
provisions of Inso's cash incentive compensation plan for senior
executives, shall be payable to the Executive within thirty (30)
days of the effective date of termination;
(C) Continued participation in all Inso medical,
dental, vision care, 401(K) and other employee benefit plans to
the extent permissible under those plans for a period of twelve
(12) months from the effective date of termination;
(D) Stock options shall vest as per the terms of
Section 2(C) above. Executive shall have ninety (90) days from
the effective date of termination to exercise any unexercised
vested options; and
(E) Should Executive remain a member of the Board of
Directors in any capacity other than as described in Section 7.4
below, such other remuneration as is reasonably determined by the
Compensation Committee of the Board to properly compensate the
Executive for his continuing activities as a member of the Board
of Directors.
7.2 Termination by Executive other than for Good Reason. In
the event of termination of Executive's employment as CEO by
Executive other than for Good Reason, Executive shall be entitled
to the following compensation:
(A) All base salary earned through the effective date
of termination, all accrued but unused vacation time, all then
unreimbursed expenses, plus a pro-rated target annual bonus,
based upon the provisions of Inso's cash incentive compensation
plan for senior executives, shall be payable to the Executive
within five (5) days of the effective date of termination; and
(B) Stock options shall vest as per the terms of Section
2(C) above. Executive shall have ninety (90) days from
the effective date of termination to exercise any
unexercised vested options.
7.3 Termination by Inso for Cause. In the event of the
termination of Executive's employment as CEO by Inso for Cause,
Executive shall be entitled to the following compensation:
(A) All base salary earned through the effective date
of termination, all accrued but unused vacation time earned
through the effective date of termination, and all then
unreimbursed expenses, shall be payable to the Executive within
five (5) days of the effective date of termination; and
(B) Stock options shall vest as per the terms of Section
2(C) above. Executive shall have ninety (90) days from
the effective date of termination to exercise any
unexercised vested options.
7.4 Termination as CEO; Retention of Strategic Role. In the
event of termination of Executive's employment as CEO by Inso
without Cause or by Executive for Good Reason pursuant to Section
7.1 above, should Executive at the behest of Inso or the Board of
Directors retain a strategic role in implementing key Inso
policies, whether as Chairman of the Board or otherwise, then in
lieu of the compensation described in Section 7.1 above,
Executive shall be entitled to the following compensation:
(A) An initial base salary of $120,000 per year, subject to
annual review by the Board, payable in equal bi-weekly
installments, beginning on the effective date of the
termination of Executive's employment as CEO of Inso and
continuing for so long as Executive serves in such
strategic role;
(B) Solely for the year in which Executive's
employment as CEO of Inso is terminated, a bonus equal to the
greater of (1) $100,000, or (2) the Executive's pro-rated target
annual bonus, based upon the provisions of Inso's cash incentive
compensation plan for senior executives;
(C) Continued participation in all Inso medical,
dental, vision care, 401(K) and other employee benefit plans to
the extent permissible under those plans, for so long as
Executive serves in such strategic role;
(D) Stock options shall vest as per the terms of
Section 2(C) above. Exercise of any unexercised vested options
shall be per the terms of Inso's Stock Option Plan; and
(E) For so long as Executive serves in such strategic
role, Executive shall receive annual grants of Non-qualified
Stock Options to purchase 10,000 shares of Inso's common stock,
the first such grant to be on the effective date of the
termination of Executive's employment as CEO of Inso.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the
Commonwealth of Massachusetts and shall be deemed to be performed
in Massachusetts. Each party consents to the jurisdiction of the
courts of Massachusetts for the resolution of any dispute with
respect to this Agreement.
9. Severability. In case any one or more of the provisions
contained in this Agreement or the other agreements executed in
connection herewith for any reason shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provision of this Agreement or such other agreements, but this
Agreement or the such other agreements, as the case may be, shall
be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein or therein.
10. Waivers and Modifications. This Agreement may be modified,
and the rights, remedies and obligations contained in any
provision hereof may be waived, only in accordance with this
paragraph 10. No waiver by either party of any breach by the
other or any provision hereof shall be deemed to be a waiver of
any later or other breach thereof or as a waiver of any other
provision of this Agreement. This Agreement (including any
exhibits hereto) sets forth all of the terms of the
understandings between the parties with reference to the subject
matter set forth herein and may not be waived, changed,
discharged orally or by any course of dealing between the
parties, but only by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is
sought.
11. Assignment. Executive acknowledges that the services to be
rendered by him are unique and personal in nature. Accordingly,
Executive may not assign any of his rights or delegate any of his
duties or obligations under this Agreement. The rights and
obligations of Inso under this Agreement shall inure to the
benefit of, and shall be binding upon, the successors and assigns
of Inso.
12. Miscellaneous. All payments made by Inso under this
Agreement shall be reduced by any tax or other amounts required
to be withheld by Inso under applicable law. The headings and
captions in this Agreement are for convenience only and in no way
define or describe the scope or content of any provision of this
Agreement. This Agreement may be executed in two (2) or more
counterparts, each of which shall be an original and all of which
together shall constitute one and the same instrument.
13. Attorney's Fees. Inso shall pay Executive's reasonable
attorney's fees incurred by Executive in connection with this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written as an instrument
under seal.
Inso Corporation Xxxxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxxxxx /s/ Xxxxxxx X. Xxxxxx
__________________________ ___________________________
signature
Xxxxx X. Xxxxxxxxx
__________________________
print name
President and COO
__________________________
title
